Who wants to be a gazillionaire?

What to do with biggest single-state lottery win

By

DeborahAdamson

SAN JOSE, Calif. (CBS.MW) - A fantasy for lottery hopefuls can go something like this.

A day after winning the jackpot, you walk into the factory where you've spent hours slumped over an assembly line, look for that obnoxious floor supervisor and tell him, with relish: "I quit!" Then walk off into the sunset - and into a life of luxury and leisure.

It could mean jetting off to Paris on the Concorde for the weekend with a few dozen friends, or buying a mansion in the Hamptons and hobnobbing with the Spielbergs. You could pay cash for both a Lamborghini and a Hummer to go with your new digs, or impress your new jetsetter friends by lighting your cigar with a $100 bill.

On Saturday, the California State Lottery made it possible for one ticket holder to do all that.

In the largest single-state jackpot in history, the state lottery announced that there was one winning ticket for a $141 million windfall - purchased from Union liquor store in San Jose, Calif. The chances of winning this lottery were 1 in 41 million.

If he, she or they opt for a lump sum payment, a whopping $70 million before taxes is the prize, according to the state lottery. If 26 payments are chosen, that yields $3.5 million to $7.1 million yearly.

In either case, that's a lot of dough. How do past winners handle it?

"They are in shock," said Vince Montane, a Lottery spokesman.

But most winners don't spend their lottery money on flagrantly extravagant things, he said. Most of the time, they'll buy a new car, a nicer house and go on a dream vacation. They'll help their family and friends and spend some money on charity, Montane said.

Envy everywhere

But their lives will change, especially for big lottery winners. For one, people get envious of their wealth.

"They get a huge amount of static from other people," said Steve Allensworth, publisher of Lottery News who writes a column called "Mr. Lotto" for the New York Daily News.

People look at lottery winners a little differently after the windfall, he said. There's a mental shift and change in attitude. For example, going out to dinner could be stressful, if lottery winners get cracks like, "Oh, you're picking up the check because you're rich," he said.

A teacher who shared a lottery jackpot felt social pressure to quit after his fellow teachers chastised him for continuing to work when he didn't need the money, Allensworth said. They said the job should go to someone who needed it. But much of it was envy, he added.

A former circus clown gave away all his lottery winnings after a rash of problems, including his brother trying to put a hit on him, he said.

Believe it or not, but becoming a multi-millionaire overnight can be quite stressful, financial planners said.

The trouble comes with the new demands they face: Their family suddenly counts on their generosity, friends treat them differently and charities come calling. An ex-spouse sues for his or her share.

Before they know it, their social support system starts tottering - and sometimes crumbles.

"It's a big eye opener," said Susan Bradley, author of 'Sudden Money: Managing a Financial Windfall.' "It can make life, far, far worse. There are people who want to desperately give it away."

Lottery winners on welfare

At least, they have financial security, you say. But do they?

Many lottery winners tend to overspend, Bradley said. Suddenly, the sky seems to be the limit. But they have to know how to manage it.

It's one thing to buy a $5 million beach house in Malibu, it's quite another to pay for upkeep and maintenance every year, she said. The bottom line: If you're not careful, you could waste a fortune.

Just look at M.C. Hammer. Once listed among the top 20 highest-paid entertainers by Forbes magazine, he filed for bankruptcy in 1996.

If the lottery is paid in annual installments, depending on the size of the jackpot, winners can embark on this disastrous trend: run through their money in the first year quickly, rack up debt while waiting for the second year's payment and so on. If they're really strapped, Bradley said, they could sell their future lottery payments to companies that specialize in this asset - at a 50 percent discount.

There's a Florida resident who won the New York lottery 20 years ago. He's getting his final $160,000 installment this year, Bradley said. But he doesn't have much to show for it. He's gambling this year's lottery check, hoping for another windfall. But next year, he'll have to survive on Social Security, Bradley added.

On the occasion of the Pennsylvania lottery's 20th anniversary, a study was done on what happened to $1 million jackpot winners two decades later. Several were on welfare, said Eleanore Szymanski, a certified financial planner at EKS Associates in Princeton, N.J.

"People spent it as quickly as they received it," she said.

Sudden wealth syndrome

But getting a windfall could soon be a lot more common, too.

Bradley estimates that Americans could see a windfall of $50 trillion - that's with a "t" - over the next 10 to 15 years from inheritances, assets handed down from businesses, stock options and other sources.

"The number of "sudden-money" families is accelerating," she said.

But beneficiaries need to protect and invest the capital, Szymanski said. They need to develop a plan to ensure that their money will last.

It's not hard to overspend. A win of $1 million looks like a lot. But broken down into payments over 20 years, the annual payout after taxes comes to $36,000 -- a welcome addition but hardly a fortune. And it's not that difficult to blow the whole amount quickly.

The bottom line? Regardless of the windfall's size, beneficiaries have to get used to it mentally and adjust their lives to it, financial planners said. Only by accepting the responsibilities and challenges that come with sudden wealth can they handle it well.

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